BOLINGBROOK, Ill.--(BUSINESS WIRE)--
Ulta Beauty, Inc. (NASDAQ: ULTA) today announced financial results for
the thirteen week period (“Second Quarter”) and twenty-six week period
(“First Six Months”) ended August 4, 2018, which compares to the same
periods ended July 29, 2017.

“The Ulta Beauty team delivered a strong performance in the second
quarter, reflecting rapid growth in prestige boutique brands, mass
cosmetics, skin care and fragrance, offset by continued moderation in
the growth rates of a few of our large color cosmetics brands,” said
Mary Dillon, chief executive officer. “Our flexible business model
continues to support healthy retail comps, excellent new store
productivity, and high growth for Ulta.com, resulting in significant
market share gains across categories.”

Recent Accounting Pronouncement – Revenue Recognition

On February 4, 2018, the Company adopted Accounting Standards
Codification (ASC) Topic 606, Revenue from Contracts with Customers (ASC
606). The Company adopted the new revenue standard using the modified
retrospective transition method applied to all contracts with the
cumulative effect recorded to the opening balance of retaining earnings
as of the date of adoption. The comparative information has not been
restated and continues to be reported under accounting standards in
effect for those periods.

The adoption of the new revenue standard increased revenue by $9.4
million and $23.5 million for the 13 weeks and 26 weeks ended August 4,
2018, respectively. This is due to income from our credit card program
and gift card breakage now being included in net sales, as well as
e-commerce revenue now being recognized upon shipment, versus the
previous accounting treatment that was based on delivery of merchandise
to the guest. These items are partially offset by the value of points
earned in our loyalty program now reducing net sales. For the 13 weeks
and 26 weeks ended August 4, 2018, gross profit margin increased by 60
basis points and 50 basis points, respectively, while selling, general
and administrative expenses deleveraged by 80 basis points and 70 basis
points, respectively. This resulted in a net impact to operating profit
margin of 20 basis points of deleverage for both the 13 weeks and 26
weeks ended August 4, 2018. Additional information about the impact of
the adoption of ASC 606 can be found in our quarterly report on Form
10-Q available at http://ir.ultabeauty.com.

For the Second Quarter of Fiscal 2018

Net sales increased 15.4% to $1,488.2 million compared to $1,289.9
million in the second quarter of fiscal 2017;

Comparable sales (sales for stores open at least 14 months and
e-commerce sales) increased 6.5% compared to an increase of 11.7% in
the second quarter of fiscal 2017. The 6.5% comparable sales increase
was driven by 3.1% transaction growth and 3.4% growth in average
ticket;

E-commerce sales increased 37.9% to $132.8 million compared to $96.3
million in the second quarter of fiscal 2017, representing 250 basis
points of the total company comparable sales increase of 6.5%;

Salon sales increased 8.8% to $74.0 million compared to $68.0 million
in the second quarter of fiscal 2017;

Gross profit as a percentage of net sales decreased 40 basis points to
36.0% compared to 36.4% in the second quarter of fiscal 2017, due to
category and channel mix shifts and investments in our salon services
and supply chain operations, partially offset by the impact of new
revenue recognition accounting;

Selling, general and administrative (SG&A) expenses as a percentage of
net sales increased 70 basis points to 22.7% compared to 22.0% in the
second quarter of fiscal 2017, due to deleverage of investments in
store labor to support growth initiatives and the impact of new
revenue recognition accounting, partially offset by leverage in
corporate overhead;

Pre-opening expenses decreased to $4.5 million compared to $6.1
million in the second quarter of fiscal 2017. Real estate activity in
the second quarter of fiscal 2018 included 19 new stores, seven
remodels, and one relocation, compared to 20 new stores, four
remodels, and one relocation in the second quarter of fiscal 2017;

Operating income increased 7.8% to $193.8 million, or 13.0% of net
sales, compared to $179.8 million, or 14.0% of net sales, in the
second quarter of fiscal 2017;

Tax rate decreased to 23.9% compared to 36.7% in the second quarter of
fiscal 2017. The decrease was primarily due to tax reform;

Net income increased 29.9% to $148.3 million compared to $114.2
million in the second quarter of fiscal 2017; and

Diluted earnings per share increased 34.4% to $2.46 compared to $1.83
in the second quarter of fiscal 2017, which included a $0.02 benefit
due to income tax accounting for share-based compensation.

For the First Six Months

Net sales increased 16.4% to $3,031.9 million compared to $2,604.7
million in the first six months of fiscal 2017;

Comparable sales increased 7.3% compared to an increase of 13.0% in
the first six months of fiscal 2017. The 7.3% comparable sales
increase was driven by 4.1% transaction growth and 3.2% growth in
average ticket;

E-commerce sales increased 43.2% to $287.2 million compared to $200.6
million in the first six months of fiscal 2017, representing 300 basis
points of the total company comparable sales increase of 7.3%;

Salon sales increased 9.4% to $149.7 million compared to $136.8
million in the first six months of fiscal 2017;

Gross profit as a percentage of net sales decreased 10 basis points to
36.2% compared to 36.3% in the first six months of fiscal 2017, due to
category and channel mix shifts and investments in our salon services,
partially offset by the impact of new revenue recognition accounting;

SG&A expenses as a percentage of net sales increased 70 basis points
to 22.5% compared to 21.8% in the first six months of fiscal 2017, due
to deleverage from investments in store labor to support growth
initiatives and the impact of new revenue recognition accounting,
partially offset by leverage in corporate overhead;

Pre-opening expenses decreased to $9.8 million compared to $10.3
million in the first six months of 2017. Real estate activity in the
first six months of 2018 included 53 new stores, nine remodels, and
one relocation, compared to 38 new stores, five remodels, and three
relocations in the first six months of fiscal 2017;

Operating income increased 9.6% to $403.7 million, or 13.3% of net
sales, compared to $368.2 million, or 14.2% of net sales, in the first
six months of fiscal 2017;

Tax rate decreased to 23.0% compared to 34.3% in the first six months
of fiscal 2017. The decrease was primarily due to tax reform;

Net income increased 29.0% to $312.7 million compared to $242.4
million in the first six months of fiscal 2017; and

Diluted earnings per share increased 33.0% to $5.16, including a
benefit of $0.07 due to income tax accounting for share-based
compensation, compared to $3.88 in the first six months of fiscal
2017, which included a $0.16 benefit due to income tax accounting for
share based compensation.

Balance Sheet

Merchandise inventories at the end of the second quarter of fiscal 2018
totaled $1,219.7 million compared to $1,144.7 million at the end of the
second quarter of fiscal 2017, representing an increase of $75.0
million. The increase in total inventory was driven by 114 net new
stores and the opening of the Company’s distribution center in Fresno,
California, partially offset by inventory productivity benefits from
supply chain investments in new systems and merchandise planning tools.
Average inventory per store decreased 4.3% compared to the second
quarter of fiscal 2017.

The Company ended the second quarter of fiscal 2018 with $386.1 million
in cash and short-term investments.

Share Repurchase Program

During the second quarter of fiscal 2018, the Company repurchased
512,143 shares of its stock at a cost of $127.4 million. Year to date
fiscal 2018, the Company has repurchased 1,130,694 shares at a cost of
$260.5 million. As of August 4, 2018, $401.8 million remained available
under the $625.0 million share repurchase program announced in
March 2018.

Store Expansion

During the second quarter of fiscal 2018, the Company opened 19 stores
located in Auburn, WA; Crystal Lake, IL; Greer, SC; Hamilton, NJ;
Hingham, MA; Kahului, HI; New Caney, TX; Owasso, OK; Pico Rivera, CA;
Pinecrest, FL; Riverton, UT; Sacramento, CA; Salem, OR; Seneca, SC; St.
Charles, IL; Staten Island, NY; Wall Township, NJ; Walla Walla, WA and
Wethersfield, CT. In addition, the Company closed two stores. The
Company ended the second quarter of fiscal 2018 with 1,124 stores and
square footage of 11,824,009, representing an 11.2% increase in square
footage compared to the second quarter of fiscal 2017.

Outlook

For the third quarter of fiscal 2018, the Company expects net sales in
the range of $1,550.0 million to $1,563.0 million, compared to actual
net sales of $1,342.2 million in the third quarter of fiscal 2017.
Comparable sales for the third quarter of fiscal 2018, including
e-commerce sales, are expected to increase 7% to 8%. The Company
reported a comparable sales increase of 10.3% in the third quarter of
fiscal 2017.

Diluted earnings per share for the third quarter of fiscal 2018 is
estimated to be in the range of $2.11 to $2.16. This compares to diluted
earnings per share for the third quarter of fiscal 2017 of $1.70.

For fiscal 2018, the Company plans to:

increase total sales in the low teens percentage range;

achieve comparable sales growth of approximately 6% to 8%;

grow e-commerce sales in the 40% range;

open approximately 100 new stores and execute 15 remodel or relocation
projects;

The Company has used non-GAAP financial measures in this press release.
Adjusted financial measures refer to financial information adjusted to
exclude from financial measures prepared in accordance with accounting
principles generally accepted in the United States (GAAP) items
identified in this press release. The Company believes that the
presentation of adjusted financial results provides additional
information on comparisons between periods by excluding certain items
that affect overall comparability. Non-GAAP financial measures should be
considered in addition to, and not as an alternative for, the Company’s
reported results prepared in accordance with GAAP.

Conference Call Information

A conference call to discuss second quarter of fiscal 2018 results is
scheduled for today, August 30, 2018, at 5:00 p.m. Eastern Time /
4:00 p.m. Central Time. Investors and analysts interested in
participating in the call are invited to dial (877) 705-6003. The
conference call will also be webcast live at http://ir.ultabeauty.com.
A replay of the webcast will remain available for 90 days. A replay of
the conference call will be available until 11:59 p.m. ET on September
13, 2018 and can be accessed by dialing (844) 512-2921 and entering
conference ID number 13682124.

About Ulta Beauty

Ulta Beauty is the largest beauty retailer in the United States and the
premier beauty destination for cosmetics, fragrance, skin, hair care
products and salon services. Since opening its first store in 1990, Ulta
Beauty has grown to become the top national retailer providing All
Things Beauty. All in One Place.™ The Company offers more than 20,000
products from approximately 500 well-established and emerging beauty
brands across all categories and price points, including Ulta Beauty’s
own private label. Ulta Beauty also offers a full-service salon in every
store featuring hair, skin, and brow services. Ulta Beauty is recognized
for its commitment to personalized service, fun, and inviting stores and
its industry-leading Ultamate Rewards loyalty program. As of August
4, 2018, Ulta Beauty operates 1,124 retail stores across 49 states and
also distributes its products through its website, which includes a
collection of tips, tutorials, and social content. For more information,
visit www.ulta.com.

Forward-Looking Statements

This press release contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, and the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, which reflect our current views with
respect to, among other things, future events and financial performance.
You can identify these forward-looking statements by the use of
forward-looking words such as “outlook,” “believes,” “expects,” “plans,”
“estimates,” “targets,” “strategies” or other comparable words. Any
forward-looking statements contained in this press release are based
upon our historical performance and on current plans, estimates and
expectations. The inclusion of this forward-looking information should
not be regarded as a representation by us or any other person that the
future plans, estimates, targets, strategies or expectations
contemplated by us will be achieved. Such forward-looking statements are
subject to various risks and uncertainties, which include, without
limitation: changes in the overall level of consumer spending and
volatility in the economy; the possibility that we may be unable to
compete effectively in our highly competitive markets; the possibility
that cybersecurity breaches and other disruptions could compromise our
information or result in the unauthorized disclosure of confidential
information; our ability to gauge beauty trends and react to changing
consumer preferences in a timely manner; our ability to attract and
retain key executive personnel; the possibility that the capacity of our
distribution and order fulfillment infrastructure and the performance of
our newly opened and to be opened distribution centers may not be
adequate to support our recent growth and expected future growth plans;
our ability to sustain our growth plans and successfully implement our
long-range strategic and financial plan; the possibility of material
disruptions to our information systems; changes in the wholesale cost of
our products; the possibility that new store openings and existing
locations may be impacted by developer or co-tenant issues; natural
disasters that could negatively impact sales; our ability to
successfully execute our common stock repurchase program or implement
future common stock repurchase programs; and other risk factors detailed
in our public filings with the Securities and Exchange Commission (the
“SEC”), including risk factors contained in our Annual Report on
Form 10-K for the fiscal year ended February 3, 2018, as such may be
amended or supplemented in our subsequently filed Quarterly Reports on
Form 10-Q. Our filings with the SEC are available at www.sec.gov.
Except to the extent required by the federal securities laws, the
Company does not undertake to publicly update or revise its
forward-looking statements, whether as a result of new information,
future events or otherwise.

Exhibit 1

Ulta Beauty, Inc.

Consolidated Statements of Income

(In thousands, except per share data)

13 Weeks Ended

August 4,

July 29,

2018

2017

(Unaudited)

(Unaudited)

Net sales

$

1,488,221

100.0

%

$

1,289,854

100.0

%

Cost of sales

952,760

64.0

%

820,528

63.6

%

Gross profit

535,461

36.0

%

469,326

36.4

%

Selling, general and administrative expenses

337,142

22.7

%

283,427

22.0

%

Pre-opening expenses

4,504

0.3

%

6,099

0.5

%

Operating income

193,815

13.0

%

179,800

14.0

%

Interest income, net

(1,143

)

0.1

%

(555

)

0.0

%

Income before income taxes

194,958

13.1

%

180,355

14.0

%

Income tax expense

46,635

3.1

%

66,162

5.1

%

Net income

$

148,323

10.0

%

$

114,193

8.9

%

Net income per common share:

Basic

$

2.47

$

1.84

Diluted

$

2.46

$

1.83

Weighted average common shares outstanding:

Basic

60,070

61,935

Diluted

60,375

62,379

Exhibit 2

Ulta Beauty, Inc.

Consolidated Statements of Income

(In thousands, except per share data)

26 Weeks Ended

August 4,

July 29,

2018

2017

(Unaudited)

(Unaudited)

Net sales

$

3,031,888

100.0

%

$

2,604,733

100.0

%

Cost of sales

1,935,714

63.8

%

1,659,399

63.7

%

Gross profit

1,096,174

36.2

%

945,334

36.3

%

Selling, general and administrative expenses

682,766

22.5

%

566,872

21.8

%

Pre-opening expenses

9,751

0.3

%

10,257

0.4

%

Operating income

403,657

13.3

%

368,205

14.2

%

Interest income, net

(2,468

)

0.1

%

(893

)

0.0

%

Income before income taxes

406,125

13.4

%

369,098

14.2

%

Income tax expense

93,406

3.1

%

126,682

4.9

%

Net income

$

312,719

10.3

%

$

242,416

9.3

%

Net income per common share:

Basic

$

5.18

$

3.91

Diluted

$

5.16

$

3.88

Weighted average common shares outstanding:

Basic

60,340

62,018

Diluted

60,630

62,483

Exhibit 3

Ulta Beauty, Inc.

Condensed Consolidated Balance Sheets

(In thousands)

August 4,

February 3,

July 29,

2018

2018

2017

(Unaudited)

(Unaudited)

Assets

Current assets:

Cash and cash equivalents

$

237,107

$

277,445

$

92,860

Short-term investments

149,000

120,000

180,000

Receivables, net

103,666

99,719

67,593

Merchandise inventories, net

1,219,685

1,096,424

1,144,702

Prepaid expenses and other current assets

103,618

98,666

98,215

Prepaid income taxes

17,082

1,489

9,124

Total current assets

1,830,158

1,693,743

1,592,494

Property and equipment, net

1,212,978

1,189,453

1,095,135

Deferred compensation plan assets

19,585

16,827

14,588

Other long-term assets

10,628

8,664

—

Total assets

$

3,073,349

$

2,908,687

$

2,702,217

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

$

409,849

$

325,758

$

313,483

Accrued liabilities

348,906

302,307

256,794

Accrued income taxes

—

14,101

—

Total current liabilities

758,755

642,166

570,277

Deferred rent

422,455

407,916

387,670

Deferred income taxes

49,700

59,403

85,181

Other long-term liabilities

29,961

24,985

23,739

Total liabilities

1,260,871

1,134,470

1,066,867

Commitments and contingencies

Total stockholders’ equity

1,812,478

1,774,217

1,635,350

Total liabilities and stockholders’ equity

$

3,073,349

$

2,908,687

$

2,702,217

Exhibit 4

Ulta Beauty, Inc.

Consolidated Statements of Cash Flows

(In thousands)

26 Weeks Ended

August 4,

July 29,

2018

2017

(Unaudited)

Operating activities

Net income

$

312,719

$

242,416

Adjustments to reconcile net income to net cash provided by
operating activities:

Depreciation and amortization

137,815

125,582

Deferred income taxes

612

(1,317

)

Non-cash stock compensation charges

13,172

11,649

Loss on disposal of property and equipment

499

2,348

Change in operating assets and liabilities:

Receivables

(3,947

)

21,038

Merchandise inventories

(123,261

)

(200,727

)

Prepaid expenses and other current assets

(4,952

)

(9,594

)

Income taxes

(29,694

)

(18,095

)

Accounts payable

84,091

53,965

Accrued liabilities

(13,149

)

(29,557

)

Deferred rent

14,539

21,479

Other assets and liabilities

(441

)

806

Net cash provided by operating activities

388,003

219,993

Investing activities

Purchases of short-term investments

(558,163

)

(240,000

)

Proceeds from short-term investments

529,163

90,000

Purchases of property and equipment

(141,691

)

(193,210

)

Net cash used in investing activities

(170,691

)

(343,210

)

Financing activities

Repurchase of common shares

(260,452

)

(178,085

)

Stock options exercised

8,448

13,179

Purchase of treasury shares

(5,646

)

(4,027

)

Net cash used in financing activities

(257,650

)

(168,933

)

Net decrease in cash and cash equivalents

(40,338

)

(292,150

)

Cash and cash equivalents at beginning of period

277,445

385,010

Cash and cash equivalents at end of period

$

237,107

$

92,860

Exhibit 5

2018 Store Expansion

Total stores open

Number of stores

Number of stores

Total stores

at beginning of the

opened during the

closed during the

open at

Fiscal 2018

quarter

quarter

quarter

end of the quarter

1st Quarter

1,074

34

1

1,107

2nd Quarter

1,107

19

2

1,124

Gross square feet for

Total gross square

stores opened or

Gross square feet for

Total gross square

feet at beginning of

expanded during the

stores closed

feet at end of the

Fiscal 2018

the quarter

quarter

during the quarter

quarter

1st Quarter

11,300,920

355,482

10,607

11,645,795

2nd Quarter

11,645,795

198,852

20,638

11,824,009

Exhibit 6

Ulta Beauty, Inc.

Pro-forma Effect of ASC 606

(In thousands)

(Unaudited)

The Company adopted ASC 606 and the related amendments as of
February 4, 2018 using the modified retrospective transition
method applied to all contracts. The comparative information has
not been restated and continues to be reported under accounting
standards in effect for those periods. The following table
presents selected as-reported financial results and the pro-forma
effect of ASC 606 as if the recognition and presentation guidance
in the accounting standard had been applied in fiscal 2017. The
fiscal 2017 pro-forma financial information included in the table
below is presented for information purposes only.